Penaion

Question 1

Pension plan Statement of changes formula

Answer 1

Dividends and interest+ employer contributions + increase in FV

Question 2

Pension expense formula

Pbo 3mil
Plan assets 2mil
Psc 400,000
Pbo discount 6%
Expected return 4%
Current your service cost 290,000
Avg remaining life 10yrs

Answer 2

Ex:
Pbo 3mil
Plan assets 2mil
Psc 400,000
Pbo discount 6%
Expected return 4%
Current your service cost 290,000
Avg remaining life 10yrs

Service cost= 290k
Interest cost= 204k [(3mil+400,000)x6%]
-Expect return=(80k) [2milx4%]
Amort. Psc= 40k [400,000/10]
Amort. Gain/loss=0
Total= 454k

Question 3

How is the corridor amount calculated?

Answer 3

10% of the greater of the beginning balance of PBO or beginning of the year FV of plan assets

Question 4

How do you calculate interest expense if there is a planned amendment?

Answer 4

(Beg of year PBO + planned amendment) x settlement rate

Question 5

1. ) What is the difference between an “expected return on assets” and “actual return on assets?
2. ) How do you calculate the expected return on assets?

Answer 5

1. ) the gain or loss on the asset which is recognized in the OCI.
2. ) Multiply the expected rate of return on assets by the fair value of planned assets. This is used to calculate pension expense and also affects the pension liability.

Question 6

What is the present value of all future retirement payments attributed by the pension benefit formula to employee services rendered prior to that date only?

Answer 6

Accumulated benefit obligation

Question 7

What are the required disclosures for pensions?

Answer 7

The components of period pension costs
The amount of unrecognized prior service cost.
A detailed description of the plan including employee groups covered.

Question 8

What the required schedules for a defined pension plan?

Answer 8

1. )The funded status of its pension plan with the amounts recognized in the balance sheet showing separately the noncurrent assets, current liabilities, and noncurrent liabilities recognized.
2. )Rates for assumed discount rate, rate of compensation increase, and expected long-term rate of return on plan assets.
3. )The recognized amount of the net periodic benefit cost with the components shown separately.

Question 9

A company has multiple defined benefit pension plans. A pension asset reported in the statement of financial position represents the amount by which the…?

Answer 9

Answer: Fair value of plan assets exceeds the projected benefit obligation for the company’s overfunded plans.

Plans are aggregated based on overfunded and underfunded status. A plan is overfunded and reported as a pension asset when the plan assets exceed the projected benefit obligation.

Question 10

What makes up the compensation expense relating to the employee stock ownership plan (ESOP)?

Answer 10

The amount contributed or committed to be contributed to an employee stock ownership plan (ESOP) in a given year should be the measure of the amount to be charged to expense by the employer.

Question 11

Does the FV option apply to Pensions?

Answer 11

No

Question 12

An employers obligation for post retirement benefits are expected to be fully provided to an employee and must be fully accrued by…?

Answer 12

The date the employee is fully eligible